A Look at the State of Mobility in 2024
The beginning of a new year inevitably prompts us to think about what to expect from the year ahead. While Cornerstone cannot predict the future, we can share changes we are anticipating and the trends we are watching in 2024. Real estate, artificial intelligence, and global supply chain were hot topics in 2023 and are continuing to trend within the industry, with immigration and nuanced global mobility policy structure gaining momentum early in the year.
US Real Estate Litigation
In the US, the landmark buyer broker compensation case of Sitzer/Burnett and similar lawsuits will continue to evolve in 2024. As a quick recap, in a traditional real estate transaction, home sellers pay the entire real estate agent commission, the amount of which is negotiable when the home is being listed. This commission is often split 50/50 between the listing agent and the buyer’s agent but other agreements may be negotiated as well. The litigation seeks to change the way buyer’s agents are compensated. In early January 2024, a post-trial motion was filed by three defendants in the Sitzer/Burnett case (the National Association of Realtors, Keller Williams Realty and HomeServices of America) requesting the judge to overturn the verdict. Additional motions were filed requesting a new trial and to remove class action status should the judge not agree to the verdict change. The plaintiffs are expected to file a response by late February, but a final ruling by the judge is not expected until mid to late spring 2024.Editor's Note: On February 1, 2024, after blog was published, two additional events occurred in the Sitzer/Burnett litigation. On February 1, Keller Williams proposed a settlement of $70 million that would release them from Sitzer/Burnett as well as other lawsuits. As part of the settlement, Keller Williams commits to transparency in compensation and will not require membership in the National Association of Realtors or for agents to offer or receive compensation from other brokers. On February 2, HomeServices of America asked the US Supreme Court to reject the verdict claiming the trial should not have occurred due to arbitration clauses in the agreements between the sellers and subsidiaries of HomeServices of America. These developments will continue to generate discussions on broker compensation.Buyer Agency Agreements/Broker Fees
At least 18 states now require written buyer agency agreements, including:
| Arkansas | Missouri | South Carolina |
| Alaska | Nebraska | Utah |
| Georgia | New Hampshire | Vermont |
| Idaho | North Carolina | Virginia |
| Maryland | North Dakota | Washington |
| Minnesota | Pennsylvania | Wisconsin |
Additionally, some real estate companies are putting buyer agency agreements in place - even when not required - to ensure transparency. The agreements themselves vary, however, all agreements outline whether the buyer will be responsible for any fee or commission to the buyer’s agent. Currently, there is no widespread change to the traditional compensation model, but buyers need to be aware of what they are signing, even in a state that does not require an agreement. Unless the fee noted is $0, the buyer could be responsible for their agent’s compensation in any purchase transaction, depending on the actions taken by the seller or the seller’s agent regarding the commission. Cornerstone has prepared our teams to review and explain these agreements to our customers. We highly recommend that relocating buyers use Cornerstone network agents for their home purchase and that buyers review buyer agency agreements with their Consultants prior to signing any documents.
Cornerstone is actively working with our broker network to keep abreast of changing requirements and communicate expectations. We recommend that our clients discuss potential impacts to their program with their Cornerstone team, including possible approaches to exception requests.Canadian Real Estate Litigation
A lawsuit in Ontario, Canada filed in 2021 was approved for class-action status in September 2023 against the Canadian Real Estate Association, the Toronto Regional Real Estate Board, and several brokerages. While similar to the US lawsuits in that the lawsuit is related to real estate commission, the class action claim is targeted toward the control of prices through the rules set forth by those organizations. As the class action suit proceeds, there could be additional changes to real estate practices. In the meantime, changes to Ontario’s Trust in Real Estate Act were made in December 2023 with the goal of education and transparency to consumers as well as an updated Code of Ethics.Canada’s Prohibition on Home Sales to Foreign Buyers
In an effort to tackle housing affordability and availability for Canadian citizens, Canada implemented a 2-year ban on the purchase of homes by foreign buyers, including both individuals and companies, which expires at the end of 2024. As US-based relocation companies are included in the definition of foreign buyers, home sale programs in Canada, where a relocation company purchases the employee’s home and sells to a buyer, have not been available. This disruption required alternative policy strategies such as direct reimbursement or property management in addition to exceptions for benefits such as temporary living. A recent article by CBC News suggested that while full year data isn’t available yet, the ban hasn’t tackled the issues effectively. With housing affordability and availability continuing as a key issue in Canada, it’s too early to know if the ban will be extended.Editor's Note:On February 4, 2024, after this blog was published, the Government of Canada announced a two-year extension to the ban on foreign ownership of Canadian housing. The ban is now extended until January 1, 2027. The full news release is available on the Government of Canada website.US Restrictions on Foreign Buyers
Effective July 2023, the state of Florida placed restrictions on certain foreign buyers from China, Cuba, North Korea, Russia, Iran, Syria, and Venezuela, with the intent of protecting national security. Under the restrictions, foreign principals are prohibited from purchasing agricultural land or real property within ten miles of military installations or critical infrastructure such as airports, seaports, power plants or other utilities, refineries, etc. Another restriction specifically prohibits non-immigrant Chinese nationals from purchasing real property. Exceptions may be available for individuals on non-tourist visas, but there are still some limitations. A lawsuit was filed by a group of Chinese nationals challenging the restrictions, but the law was upheld as it is based on citizenship rather than country of origin or race. Florida’s largest real estate trade association, Florida Realtors, describes the restrictions and outlines definitions of who is included as a foreign principal in this memorandum.
At least 14 other states have imposed varying restrictions on foreign buyers, and many other states are considering legislation. While not impacting mobility programs significantly at this time, it is an area that we are watching closely as concerns over these restrictions may impact the ability for companies to attract international talent.US Home Affordability
There is mixed news about housing affordability in the US. On one hand, Fannie Mae predicts that interest rates for 30-year fixed rate mortgages will slowly decrease in 2024, improving affordability. On the other hand, rates are not expected to decrease below 6.5% by year-end. According to Realtor.com, approximately 90% of current mortgages have rates significantly below 6%, so 6.5% may still be considered high for individuals being asked to relocate. Another factor impacted by relatively high mortgage rates is the supply of existing inventory. With homeowners locked into low rates, less inventory is available, though demand remains high. Per Realtor.com, this is partially offset with new home construction and increased rental availability but the lack of inventory still impacts options for relocating employees.
Employee reluctance to relocate is anticipated to continue to be tied to higher interest rates. Options which can help to address this reluctance such as a temporary mortgage buydown or other solutions can provide relocating employees with economic relief to help overcome this reluctance. Cornerstone’s paper on Rising Mortgage Interest Rates explores this topic in greater detail. It is available for download here.US & Canada Rental Market
After a period of high increases through the pandemic years, US rental rate increases slowed by the end of 2023 and are expected to stabilize in 2024. Rents in some markets such as Austin and Portland have declined. This stabilization was in part due to increasing inventory through new construction, though less construction is anticipated in 2024/2025 due to interest rates.
Canada’s housing challenges extend to the rental market, where rents increased on average 22% nationally over the past 2 years. Rent control laws in provinces such as British Columbia, Ontario, and Quebec have rules related to rent adjustments by landlords, even though rents continue to increase. In provinces where there is no rent control, there are still rules regarding when and how a landlord can increase rent. With Canada bringing in more than 500,000 new immigrants in 2023, the Toronto, Montreal and Vancouver areas are also experiencing very low vacancy rates. Companies may need to be prepared for temporary living exceptions in these markets.Generative AI
Discussions about rapidly evolving generative AI technology are everywhere from daily news feeds to mobility industry meetings, generating excitement about promising applications. In Deloitte’s State of Generative AI in the Enterprise Quarter 1 Report, which surveyed over 2,800 global business and technology leaders on the leading edge of using AI, 31% of companies expected to see transformation in less than one year and another 48% in the next one to three years. That said, a majority of US companies, per the US Census Bureau, are not widely using this technology though expect to in the future. We anticipate that we will continue to see this topic generate interest across our industry in the years ahead.
Cornerstone can see many positive and useful applications in the global mobility for AI, however technology is still developing and there are still risks to be evaluated. We recommend that clients begin by understanding their own company’s AI journey as well as ensuring data is clean and in a reliable format.Global Supply Chain
Global supply chain has faced uncertainty in the last few years including volume swings from 2022 to 2023. This year, global events and geopolitical issues are anticipated to have continuing impacts across services. Some of those include:Paris Olympics and Paralympics
The Paris Olympics and Paralympics will impact the European market for corporate housing, hotels, and travel, resulting in both cost increases and reduced availability. In addition to various venues in Paris, events will be held across 16 other cities in France. The Olympics are scheduled to start on July 26th and end on August 11th with the Paralympics starting on August 28th and ending on September 8th.However, disruptions will begin prior to, and linger after, those dates. Cornerstone shared tips for navigating potential disruptions related to the Games in a recent blog.Disruptions in Suez and Panama Canals
Recent attacks on ships in the Red Sea have impacted shipping globally and have roiled the shipping industry. About 14% of global shipping sails through the Red Sea and the Gulf of Aden after traversing the Suez Canal. This key traffic lane connects Europe to Asia and is used by approximately 33% of shipping companies. Because of safety concerns and increasing unrest in the area, many ships are now being rerouted, resulting in longer transit times and higher costs. The reroute involves sailing around Africa, which adds 3,000 nautical miles and delays deliveries by about 2 weeks. Shipping costs are expected to rise at least 15-20 percent due to the added expenses involved in the reroutes. This highly volatile situation changes daily, but effects on the shipping industry are expected to linger even when a peaceful resolution is found.
The Panama Canal, another key shipping lane, continues to be affected by drought, which has resulted in a capacity reduction of about 33%. Because of these capacity restrictions, many shipping companies are imposing surcharges on shipments passing through the canal. Shipping times have increased as well, especially for ships arriving at the canal without a reservation. Some shippers are seeking alternate routes, which can have a cascading effect on the shipping industry. For example, shippers may offload at US West Coast ports and then ship overland (train or truck) to the US East Coast, which can increase port and rail congestion, and affect the availability of containers, drivers, and equipment.
Companies should build internal awareness of the importance of lead time in relocation processes to help reduce unnecessary costs and to set realistic employee expectations.Short-term Rental Regulation
The number of cities regulating short-term rentals has grown. The regulations primarily target companies such as Airbnb, VRBO, and similar platforms, and mostly affect leisure travelers. However, in some cases, the regulations could impact demand for corporate apartments. For example, corporate apartment rates in New York City may see increases due to recent laws that went into effect which may push more individuals into the corporate apartment space.Companies should be prepared for small increases in corporate housing rates in some markets.Immigration
Countries are competing for highly skilled talent to address certain worker shortages, and this is anticipated to continue. In addition, an increasing number of countries are considering remote working visas to accommodate remote or hybrid working arrangements. Please refer to our most recent blog to understand what policy elements may complement these immigration policies.
Even though countries are competing for talent, an intense focus is expected to continue on ensuring locals are protected from job loss. As such, countries have increased their vigilance on compliance including an uptick in audits, improved tracking as well as more severe penalties. Companies should ensure they have a strategy to monitor immigration compliance.Global Mobility Policy
In the global mobility policy space, employee experience and cost management are expected to continue to be key themes when companies review their mobility programs. Cost management can be effectively achieved through tiered or core/flex policies and/or through benefit or service limits. From an employee experience perspective, there is a focus on increased personalization and choice, which can be achieved in a core/flex policy structure. Companies considering program redesign can work with Cornerstone to determine the best course of action.
Cornerstone is your source for relocation insights! Keeping a close eye on trends allows for informed decision-making regarding talent retention, recruitment and global mobility strategies and programs. Cornerstone will continue to monitor these topics throughout the year, keep you informed, and provide guidance on navigating the impacts. We will share relevant information and updates as they become available.